US STOCKS-Wall Street drops as Broadcom warning hits chip sector

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* Broadcom tumbles after warning of chip demand slowdown

* Tech down most among 11 major S&P sectors; Chips slide

* China’s May industrial output growth cools to 17-yr low

* Data shows U.S. retail sales rise in May

* Indexes down: Dow 0.38%, S&P 0.37%, Nasdaq 0.64% (Updates to open)

By Shreyashi Sanyal

June 14 (Reuters) - Wall Street’s main indexes dropped on Friday, as shares of chipmakers sank on a warning from sector major Broadcom of a broad weakening in global demand and Chinese data pointed to the worst slowdown in industrial growth in 17 years.

Shares of Apple Inc also slipped 1.66% and weighed the most on the three main indexes. Broadcom is a major supplier to the iPhone maker.

“Broadcom is definitely leading markets lower and that might drive other chips lower as well. Some of it is also about the U.S.-China trade war and the fight over Huawei,” said Kim Forrest, chief investment officer at Bokeh Capital Partners in Pittsburgh.

Losses in chip companies, who both source product and sell heavily in China, dragged the benchmark S&P 500 index lower, with the Philadelphia Semiconductor index tumbling 3%. Technology stocks fell 1.06%, the most among the 11 major S&P sectors.

“China was to be expected because tariffs are having an effect on them and that’s starting to show up,” Forrest said.

At 9:57 a.m. ET the Dow Jones Industrial Average was down 99.94 points, or 0.38%, at 26,006.83, the S&P 500 was down 10.68 points, or 0.37%, at 2,880.96 and the Nasdaq Composite was down 50.39 points, or 0.64%, at 7,786.74.

The S&P 500 index has gained 4.7% in June so far and was on track to end the week slightly higher, on hopes the Federal Reserve will soon cut interest rates.

A Fed meeting next week may provide the acid test of market expectations that the U.S. central bank could cut rates as much as three times this year, while a G20 summit at the end of the month may yet yield more progress on a trade deal.

Data showed U.S. retail sales increased in May, although slightly below expectations, which could ease fears the domestic economy was slowing down sharply in the second quarter.

“It’s important to remember that softening economic data does not mean recessionary economic data,” Mike Loewengart, vice-president of investment strategy at E*Trade Financial in New York, said.

Declining issues outnumbered advancers for a 2.10-to-1 ratio on the NYSE and a 2.17-to-1 ratio on the Nasdaq.

The S&P index recorded 20 new 52-week highs and one new low, while the Nasdaq recorded 22 new highs and 30 new lows. (Reporting by Shreyashi Sanyal and Aparajita Saxena in Bengaluru; editing by Patrick Graham and Arun Koyyur)